First Capital, Inc. (FCAP): 5 FORCES Analysis [Nov-2025 Updated]

You're assessing a community bank, First Capital, Inc. (FCAP), right now, and you need to know if its local trust can withstand the current financial squeeze. Honestly, the picture is tight: while First Capital, Inc. (FCAP) has a solid $\mathbf{\$1.07}$ billion in core deposits, its suppliers-the depositors-are getting rate-sensitive, and customers facing low switching costs for loans can definitely shop around, especially with mortgage companies and national banks. Given its relatively small $\mathbf{\$1.19}$ billion asset base, the competitive rivalry in Southern Indiana and Kentucky is fierce, and we have to watch FinTechs that can cherry-pick profitable services without the same regulatory load, even though Q3 2025 net income hit $\mathbf{\$4.5}$ million. Let's map out exactly where the pressure points are across all five of Porter's forces for First Capital, Inc. (FCAP) below.

First Capital, Inc. (FCAP) - Porter's Five Forces: Bargaining power of suppliers

When you look at First Capital, Inc. (FCAP)'s funding structure, the suppliers are primarily the depositors and the capital providers-the investors. For a bank like First Harrison Bank, the subsidiary, depositors are the lifeblood, and their collective power is what we need to watch closely. Individually, a single depositor has very little leverage, but when you aggregate millions of dollars, their sensitivity to market interest rates-their power to move their money if rates aren't competitive-becomes significant.

To give you a concrete look at the cost of this funding, the average cost of interest-bearing liabilities for the year ended December 31, 2024, was 1.73%. This number shows you exactly what First Capital, Inc. was paying its funding suppliers for that period. However, looking at the more recent data for the nine months ended September 30, 2025, the average cost actually ticked down slightly to 1.67%. That's a small win on the cost side, even as the balance grew.

The primary, stickiest source of funding remains the core deposits. As of December 31, 2024, these deposits totaled $1.07 billion. These are the operational accounts that don't demand high rates, which is why their power is low individually. Still, that massive aggregate balance is the foundation of the balance sheet, and keeping those funds stable is key to managing supplier power.

Here is a quick comparison of the liability costs and balances we have for the supplier side:

Now, let's talk about the capital providers-your investors. They definitely have moderate power, and you see this power expressed through their expectation of consistent returns. First Capital, Inc. has been meeting this expectation, recently declaring a quarterly dividend of $0.31 per share in November 2025,. This follows a pattern of consistent payouts, which keeps investor sentiment steady, but it also sets a floor for their expectations. If that dividend were to falter, their collective power to sell shares and pressure the stock price would certainly rise.

You can see the trend in the cost of funding over the last couple of reporting periods:

• Cost of interest-bearing liabilities for the quarter ended September 30, 2024, was 1.87%.
• Cost of interest-bearing liabilities for the quarter ended September 30, 2025, was 1.66%.
• The average balance of interest-bearing liabilities for the nine months ended September 30, 2024, was $846.8 million.
• The average balance for the nine months ended September 30, 2025, increased to $886.0 million.
• The company has increased its common stock dividend for 2 successive years.

Honestly, the bank is managing the cost of its primary supplier-deposits-quite well in the current rate environment, keeping the cost of liabilities down while growing the overall balance. Finance: review the sensitivity of the $1.07 billion in core deposits to a 25 basis point shift in the Fed Funds rate by next Tuesday.

First Capital, Inc. (FCAP) - Porter's Five Forces: Bargaining power of customers

Customers face low switching costs for basic checking and loan products. For instance, a major national bank like Wells Fargo has a $10 monthly service fee on its Everyday Checking account, waivable with $500 in qualifying electronic deposits or a $1,500 minimum daily balance, indicating easy alternatives exist. Similarly, another major institution has a monthly fee of $15 on its Complete Checking account, waivable with $500 in qualifying direct deposits, with offers ending November 30, 2025.

Large commercial borrowers can easily negotiate favorable loan terms. First Capital, Inc. (FCAP), as a Business Development Company (BDC), deals with middle-market companies, where financing structures are highly customized. While specific 2025 negotiation data for FCAP is not public, the competitive nature of middle-market debt financing suggests leverage exists for large borrowers.

Local focus provides some leverage, but customers can defintely choose national banks. For example, First Capital Real Estate Investment Trust (a separate entity, but showing a local focus model) maintained a high portfolio occupancy of 97.1% as of September 30, 2025, suggesting tenant retention, but the broader market includes national players.

Residential mortgage customers have high power due to numerous non-bank lenders. The power is evident in the market structure as of mid-2025.

This high penetration by non-banks, who are often more agile, directly pressures the terms offered by all lenders, including those that might compete with First Capital, Inc. (FCAP)'s financing segments.

The bargaining power is further illustrated by the competitive landscape in related lending areas:

• Non-bank lenders' capacity shrank by 35% between April 2021 and September 2024, indicating past consolidation that benefits remaining large non-banks.
• One top non-bank originator, United Wholesale Mortgage, originated $139.7 billion in mortgages in 2024.
• The largest bank among the top 10 mortgage lenders, Chase, saw its volume jump 47.5% in Q1 2025 year-over-year.

First Capital, Inc. (FCAP) - Porter's Five Forces: Competitive rivalry

High rivalry exists among local community banks and larger regional institutions across First Capital, Inc. (FCAP)'s operating footprint. This competitive set includes well-capitalized regional players and numerous smaller, locally-focused community banks.

The bank's relatively small asset base limits scale economies when competing against larger entities. First Capital, Inc. reported total assets of $1.19 billion as of December 2024, which grew to $1.24 billion as of September 30, 2025. This places First Capital, Inc. in a competitive tier where it faces much larger regional banks.

Intense competition for loans and deposits pressures the net interest margin (NIM). While First Capital, Inc. has seen margin improvement, the constant need to price competitively for funding and lending keeps this pressure high. The tax-equivalent net interest margin reached 3.71% for the quarter ended September 30, 2025, up from 3.19% for the same period in 2024. For the nine months ended September 30, 2025, the NIM was 3.55%.

Rivalry is concentrated in the Southern Indiana and Kentucky market, where First Capital, Inc. operates. This local focus means direct competition with institutions that have deep regional ties and established deposit bases.

• Kentucky's top five banks controlled nearly $29 billion in deposits.
• In Southern Indiana, medium-sized banks (assets between $100 million and $1 billion) held 59.8% of the deposit market share as of 2005, indicating a strong community bank presence.
• Republic Bank & Trust Company, headquartered in Louisville, KY, has a significant presence across the Louisville MSA, including counties in Southern Indiana.
• The Louisville-Southern Indiana market is noted as a region of strong growth for bank deposits.

The competitive dynamic forces First Capital, Inc. to manage its funding costs carefully against loan yields. For the three months ending September 30, 2025, Net Interest Income increased by $2.1 million year-over-year, reflecting successful margin management despite the competitive environment.

First Capital, Inc. (FCAP) - Porter's Five Forces: Threat of substitutes

You're looking at how outside forces are trying to take business away from First Capital, Inc. (FCAP), specifically the threat from products that do what First Capital, Inc. (FCAP) does, but differently. This force is definitely on the rise, given the pace of digital adoption.

FinTech companies substitute traditional lending and payment services. The sheer scale of digital lending shows how much ground is being covered outside of traditional banks. The United States digital lending market reached $303.07 billion in 2025. To put that in perspective against First Capital, Inc. (FCAP)'s loan book, First Capital, Inc. (FCAP) reported net loans receivable of $642.3 million as of September 30, 2025. Digital lending already accounts for about 63% of personal loan origination in the U.S. in 2025. Furthermore, an estimated 55% of small businesses in developed regions like the U.S. accessed loans via fintech platforms in 2025.

Money market funds and brokerage accounts substitute for deposit products. Customers are always chasing yield, and these alternatives offer a place to park cash outside of traditional bank accounts. First Capital, Inc. (FCAP) reported total deposits of $1.09 billion as of September 30, 2025. The pressure is on to keep deposit costs low; First Capital, Inc. (FCAP)'s average cost of interest-bearing liabilities decreased from 1.87% in Q3 2024 to 1.66% in Q3 2025. Still, the overall U.S. fintech market, which includes these alternatives, is projected to be valued at $95.2 Bn in 2025.

Digital-only banks offer lower-fee accounts, bypassing physical branch networks. These neobanks are growing fast, especially among younger demographics who prefer mobile-first experiences. The U.S. market for digital banking platforms is expected to grow by 10.9% from 2024 to 2025. Neobanking, specifically, is anticipated to experience the fastest growth in the US FinTech market, with a CAGR of 21.67% from 2025 to 2030. In the U.S., over 76% of people now use online or mobile banking. For the 18-24 age group, 42% say they are very or somewhat likely to use an online-only bank for their primary account. This digital shift is evident as banks have been closing physical branches at an average rate of 1,646 per year since 2018.

Private mortgage companies substitute for residential real estate lending. Non-bank lenders are stepping in to fill gaps left by traditional banks, especially in commercial and specialized real estate finance. Total assets in the U.S. private credit market reached approximately $1.6 trillion in 2024, with projections toward $2.3 trillion by 2027. Nearly 40% of the direct lending market matures by the end of 2025. First Capital, Inc. (FCAP) is active here, with its Multifamily Residential Loans growing by $13.1 million and 1-4 Family Residential Mortgages growing by $7.0 million in Q3 2025.

Here's a quick look at how First Capital, Inc. (FCAP)'s scale compares to the substitute markets:

The pressure from these substitutes means First Capital, Inc. (FCAP) must keep its operational efficiency sharp. The tax-equivalent net interest margin improved to 3.71% in Q3 2025 from 3.19% in Q3 2024, which helps fight margin compression from high-yield alternatives. You need to watch how quickly digital-native competitors are scaling their deposit bases; one major digital bank added $3.4 billion in deposits in a single quarter ending October 2025.

The threat is real, and it's digital. Finance: draft a competitive analysis memo on neobank customer acquisition costs by next Tuesday.

First Capital, Inc. (FCAP) - Porter's Five Forces: Threat of new entrants

For First Capital, Inc. (FCAP), the threat of new entrants is moderated by significant structural barriers, though the rise of specialized, less-regulated players presents a persistent challenge. Launching a full-service bank requires navigating a dense regulatory maze and substantial capital commitments. Even with potential federal deregulatory efforts anticipated in 2025, changes to financial supervision typically move slowly, meaning the foundational hurdles remain high for any direct competitor attempting to replicate First Harrison Bank's chartered operations.

The sheer scale of existing institutions provides a degree of insulation. Consider the balance sheet of First Capital, Inc. (FCAP) as of September 30, 2025, which reported total assets of approximately $1.24 billion and total deposits of about $1.094 billion. A new entrant would need to raise comparable capital and secure necessary charters to compete across the full spectrum of lending and deposit-taking activities, which is a multi-year, capital-intensive proposition.

However, the landscape is fractured by FinTech entrants. These firms often avoid the comprehensive regulatory burden of a full bank by focusing on specific, profitable niches, such as point-of-sale financing or specialized payment processing. While bank partnerships were under increased scrutiny in the preceding year, the current environment in 2025 suggests a shift, potentially easing some partnership constraints, but the underlying regulatory asymmetry persists. Fintechs can cherry-pick high-margin services without needing to maintain capital reserves or compliance programs across all banking functions.

The established community trust built by First Harrison Bank is a critical, intangible barrier. In local markets, relationships and reputation often trump digital convenience, especially for core banking services. Overcoming this requires years of consistent, positive community engagement and a proven track record of stability, something a startup cannot instantly acquire.

Still, the profitability metrics signal that the market is attractive enough for targeted incursions. The record quarterly earnings for First Capital, Inc. (FCAP) in Q3 2025, with net income reaching $4.5 million, clearly indicate that sufficient profit pools exist to lure entrants focused on specific, high-return segments. These niche players look to exploit areas where First Harrison Bank might be slower to innovate or where regulatory arbitrage is possible.

New entrants, particularly those leveraging technology, must contend with specific, non-negotiable compliance areas, even if their overall regulatory load is lighter than a chartered bank's:

• Managing Data Privacy and Cybersecurity Risks.
• Ensuring Compliance with Consumer Protection Regulations.
• Navigating ESG Reporting Requirements.
• Adapting to Regulatory Changes in Digital Banking.